Modi was initially praised for his assault on tax evasion but long queues outside banks, cash shortages and policy flip-flops quickly led to anger in some quarters.

Having come to power in 2014 pledging to tackle "black" money, Modi was forced on to the defensive as frustration grew at the slow introduction of the new notes.

There has been anger in rural areas where farmers have been unable to sell crops, while small traders have reported a huge drop in earnings owing to a lack of paper currency in the system.

While many local businesses have heeded Modi's call to move towards a digital economy, some industries have ground to a halt and laid off staff, highlighting just how dependent India currently is on cash.

The demonetisation policy has proved costly for the informal economy [EPA]

Indians have until March 31 to deposit old currency notes directly with the RBI, but Friday was the last opportunity they had to do so at their local bank branches.

After the March deadline there will be a minimum 10,000 rupees ($146.5) penalty for holding old banknotes, the Press Trust of India reported.

Many Indians insisted that they did not mind the hours queueing if it forced the rich to pay taxes.

Modi will seek to regain some of that goodwill when he makes a New Year's Eve address to the nation on Saturday.

Modi had said his government would end the chaos and restore normality in 50 days.

But critics of demonetisation say the impact will last at least six more months, with concerns about lower economic growth, job losses and a fall in demand for goods.